SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
BREMER FINANCIAL CORPORATION
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
______________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined).
______________________________________________________________
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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BREMER FINANCIAL CORPORATION
A MINNESOTA CORPORATION
445 MINNESOTA STREET - SUITE 2000
ST. PAUL, MINNESOTA 55101
---------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 15, 1997 AT 8:00 O'CLOCK A.M.
---------------------------------------
TO BREMER FINANCIAL CORPORATION STOCKHOLDERS:
The Annual Meeting of Stockholders of Bremer Financial Corporation ("Company")
will be held on April 15, 1997 at 8:00 o'clock a.m., St. Paul, Minnesota time,
at the offices of Bremer Financial Corporation, Suite 2000, 445 Minnesota
Street, St. Paul, Minnesota 55101, for the following purposes:
1. To consider and act upon the Board of Directors'
recommendation to fix the number of directors of the Company
at not less than four nor more than seven.
2. To elect a Board of Directors.
3. To ratify the selection by the Board of Directors of Deloitte
& Touche LLP as the independent accountant to audit the
consolidated financial statements of the Company for the year
ended December 31, 1997.
4. To transact such other business as may properly come before
the meeting or any adjournments thereof.
The stock transfer books of the Company will not be closed. In lieu thereof, and
in accordance with the Bylaws, the Board of Directors has set the close of
business on March 7, 1997 as the record date for the determination of the
stockholders entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof.
Your attention is respectfully directed to the attached Proxy Statement and the
Proxy. IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN THE
ATTACHED PROXY AND DATE, SIGN AND MAIL IT AS PROMPTLY AS POSSIBLE IN ORDER TO
SAVE THE COMPANY FURTHER SOLICITATION EXPENSE.
By order of the Board of Directors
/s/ Janice A. Aus
JANICE A. AUS
Secretary
BREMER FINANCIAL CORPORATION
A MINNESOTA CORPORATION
445 MINNESOTA STREET - SUITE 2000
ST. PAUL, MINNESOTA 55101
612-227-7621
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 15, 1997
------------------------------------
GENERAL
This Proxy Statement is submitted in support of the solicitation of the attached
proxy by the Board of Directors of Bremer Financial Corporation, a Minnesota
corporation ("Company"), for the Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held on April 15, 1997 at 8:00 o'clock a.m. at the
offices of Bremer Financial Corporation, Suite 2000, 445 Minnesota Street, St.
Paul, Minnesota 55101, and at any adjournments thereof. The cost of solicitation
will be borne by the Company. This Proxy Statement and the accompanying Proxy
and Notice of Annual Meeting of Stockholders will be mailed to its stockholders
on or about March 19, 1997. The Company will reimburse its transfer agent for
expenses reasonably incurred in forwarding solicitation materials to beneficial
owners of shares.
The Annual Meeting is being held for the purposes of fixing the number of and
electing the Company's Board of Directors, ratifying the selection of Deloitte &
Touche LLP as the independent accountant to audit the Company's consolidated
financial statements for the year ended December 31, 1997, and transacting such
other business as may properly come before the Annual Meeting or any
adjournments thereof.
The Annual Report of the Company for the year ended December 31, 1996, including
financial statements, is being mailed to stockholders simultaneously herewith,
but the Annual Report is not to be considered part of the proxy soliciting
materials unless a portion thereof is expressly incorporated herein by
reference.
Only holders of shares of the Company's no par value Class A Common Stock
("Class A Common Stock") recorded at the close of business on March 7, 1997, the
record date for the Annual Meeting, will be entitled to notice of and to vote at
the Annual Meeting and any adjournment thereof. The securities of the Company
outstanding as of March 7, 1997 and which are entitled to vote at the meeting
consist of 1,200,000 shares of Class A Common Stock, each share being entitled
to one vote. Stockholders do not have the right to cumulate votes for the
election of directors.
The enclosed proxy, when properly signed and returned to the Company, will be
voted at the Annual Meeting as directed therein. Proxies in which no direction
is given with respect to the various matters of business to be transacted at the
Annual Meeting will be voted to set the number of the Board of Directors at not
less than four nor more than seven, in favor of the nominees for directors
proposed by the Board of Directors, in favor of ratifying the selection by the
Board of Directors of Deloitte & Touche LLP as the independent accountant to
audit the Company's consolidated financial statements for the year ended
December 31, 1997, and, as to any other matters that may properly come before
the Annual Meeting, in the best judgment of the proxy holders named in the
enclosed proxy.
The enclosed proxy may be revoked at any time prior to its exercise at the
meeting by the execution and exercise of a proxy bearing a later date and
notification in writing given to the Secretary of the Company prior to the
Annual Meeting. The authority of the proxy holders named in the enclosed proxy
will be suspended if the stockholder executing the proxy is present at the
meeting and elects to vote in person.
The Company may have one or more of its officers or employees communicate by
telephone, telegraph, or mail with some of the stockholders who may have omitted
to return proxies.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Class A Common Stock of the Company as of March 7,
1997 by each stockholder who is known by the Company to own beneficially more
than 5% of the outstanding shares of Class A Common Stock, by each director and
by each nominee director, by each person named in the Summary Compensation Table
included later in this Proxy Statement, and by all officers and directors of the
Company as a group. Except as disclosed in the footnotes to the following table,
none of the stockholders listed below beneficially owns common stock of the
Company's parent(s) or subsidiaries other than through their ownership of the
Company's Common Stock.
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership (1) Percent of Class (2)
- ------------------- ------------------------ --------------------
Otto Bremer Foundation (3)(4) 240,000 20.0%
Gene H. Sipe (4) 26,981 2.3%
Kenneth P. Nelson (4) 19,196 1.6%
Duaine C. Espegard (4) 18,861 1.6%
Terry M. Cummings (4) 12,760 1.1%
Stan K. Dardis (4) 3,193 *
William H. Lipschultz (4) 0 0%
Charlotte S. Johnson (4) 0 0%
Daniel C. Reardon 0 0%
U. S. Annuity Financial Group
3435 Washington Drive
Suite 204
Eagan, MN 55122
Sherman Winthrop 0 0%
3200 Minnesota World Trade
Center
30 East Seventh Street
St. Paul, MN 55101
All officers and directors
as a group (12 persons) 93,139 7.8%
- --------------------------
* Less than 1%.
(1) Each person or group has sole voting and investment power with respect
to all outstanding shares. The number and percentages of shares include
those allocated to the accounts of the individuals and groups in the
Company's Employee Stock Ownership Plan and the Bremer Banks Profit
Sharing Plus Plan. See "Election of Directors and Management
Information -- Executive Compensation."
(2) The percentage calculation is based on 1,200,000 shares of Class A
Common Stock outstanding at March 7, 1997.
(3) Otto Bremer Foundation owns all of the 10,800,000 shares of the
Company's Class B Common Stock, which are not entitled to be voted
except with respect to certain extraordinary corporate transactions,
none of which are being considered at the Annual Meeting of
Stockholders to be held on April 15, 1997. The Trustees of Otto Bremer
Foundation are William H. Lipschultz, Charlotte S. Johnson, and Daniel
C. Reardon.
(4) The address for each of these individuals is 445 Minnesota Street,
Suite 2000, St. Paul, Minnesota 55101.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by rules adopted by the Securities and Exchange Commission ("SEC")
under Section 16 of the Securities Exchange Act of 1934, a director or an
executive officer of the Company is required to file with the SEC an Initial
Report of Beneficial Ownership on Form 3 within a certain period after becoming
an executive officer or director stating the number of shares of Class A Common
Stock owned, a Report of Change in Beneficial Ownership on Form 4 to report
transactions in the Company's Class A Common Stock, and an Annual Statement of
Beneficial Ownership of Securities on Form 5 to report other transactions in the
Class A Common Stock that are not required to be reported on a Form 4. Based
upon the Company's review of such Forms furnished to it by the directors and
executive officers required to file such Forms, the Company believes that, with
the exception of isolated incidents of late filings reported by the Company in
previous Proxy Statements, all of these filing requirements have been satisfied.
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
The Bylaws of the Company provide that the number of directors may be set by the
stockholders (subject to the right of the Board of Directors to increase or
decrease the number of directors as otherwise permitted by law). At the Annual
Meeting held on May 15, 1996, the Company's stockholders voted to fix the number
of the Company's Board of Directors at not less than four nor more than seven
and elected five directors (William H. Lipschultz, Terry M. Cummings, Charlotte
S. Johnson, Daniel C. Reardon and Sherman Winthrop).
It is the recommendation of the Company's Board of Directors that the number of
directors be set at not less than four nor more than seven and that the five
nominees named below be elected as directors, to serve as directors until the
next Annual Meeting of the stockholders and until their successors are duly
elected and qualified as directors. The Board of Directors may appoint up to two
additional members to the Board if individuals qualified to serve as Directors
are found and agree to serve. The Board of Directors does not have a nominating
committee and, as such, the recommendations for election of Directors have been
made by the Board of Directors as a whole.
Unless otherwise directed, the proxies solicited by the Board of Directors will
be voted at the Annual Meeting in favor of setting the number of directors at
not less than four nor more than seven and in favor of the five nominees named
below. However, in the event of the inability or unwillingness of one or more of
these nominees to serve as a director at the time of the Annual Meeting on April
15, 1997 or any adjournments thereof, the shares represented by the proxies will
be voted in favor of the remainder of such nominees and may also (at the
discretion of the holders of said proxies) be voted for other nominees not named
herein in lieu of those unable or unwilling to serve. As of the date hereof, the
Board of Directors knows of no nominee who is unwilling or unable to serve.
The affirmative vote of a majority of the shares of Class A Common Stock of the
Company present at the Annual Meeting either in person or by proxy and entitled
to vote (assuming a quorum is present) is required to fix the number of
directors at not less than four nor more than seven, and a plurality of such
voting power is required to elect each director. A quorum consists of a majority
of the shares entitled to vote at the Annual Meeting.
INFORMATION ABOUT NOMINEES FOR ELECTION AS DIRECTORS
All of the nominees for election as directors are presently serving as directors
of the Company. The names and ages of the five nominees are as follows:
Names and Nominees Ages Director Since
------------------ ---- --------------
William H. Lipschultz 67 1961
Terry M. Cummings 56 1988
Charlotte S. Johnson 50 1993
Daniel C. Reardon 35 1996
Sherman Winthrop 66 1995
Mr. William H. Lipschultz has been Chairman of the Board of the Company since
April 1995 and a Trustee of the Foundation since 1961. From 1961 to 1995, he was
Vice President, Treasurer and Director of the Company. Mr. Lipschultz retired in
1996 after serving as Vice President of Stone Container Corporation since 1976.
In August 1996, Mr. Lipschultz became a director of Bremer Investment Funds,
Inc., an open-end diversified investment company, registered under the
Investment Company Act of 1940, which offers shares in two different mutual
funds.
Mr. Terry M. Cummings has been President, Chief Executive Officer and a Director
of the Company since July 1988. Mr. Cummings is also President, Chief Executive
Officer, Secretary and a Director of Bremer Financial Services, Inc. ("BFSI")
and has served in such capacities since 1982.
Ms. Charlotte S. Johnson has been a Vice President and a Director of the Company
since April 1993 and a Trustee of the Foundation since July 1991. Since July
1991 she has been involved in the Foundation's affairs on a daily basis, serving
as a representative for the organization and working on special projects. From
1990 until 1992, Ms. Johnson worked in an administrative position at Macalester
College in St. Paul, Minnesota. A lifetime resident of St. Paul, Minnesota, Ms.
Johnson has been involved in a variety of community projects.
Mr. Daniel C. Reardon has been a Vice President and a Director of the Company
since May 1996 and a Trustee of the Foundation since January 1995. He is also
the sole owner of U.S. Annuity Financial Group, an annuity brokerage firm formed
in 1995. From January 1990 until May 1995, he was Vice President of Investments
with Prudential Securities.
Mr. Sherman Winthrop has been a Director of the Company since February 1995. He
has been a senior member of the law firm of Winthrop & Weinstine, P.A., general
counsel to the Company, since February 1979. Mr. Winthrop also is a Director and
the Secretary of Zytec Corporation, which designs and manufactures electronic
power supplies and has a class of securities registered pursuant to Section 12
of the Securities Exchange Act of 1934.
With the exception of Mr. Winthrop, no nominee for the Board of Directors is a
director of another company (that is, other than the Company) with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 or subject to Section 15(d) of that Act. With the exception of Mr.
Lipschultz, no nominee for the Board of Directors is a director of a company
registered as an investment company under the Investment Company Act of 1940.
DIRECTORS' COMPENSATION. Mr. William H. Lipschultz, the Chairman of the Board of
the Company, was paid $44,792 of compensation in 1996 for rendering his services
as an officer and Director of the Company. Ms. Charlotte S. Johnson and Mr.
Daniel C. Reardon were paid $44,792 and $25,000, respectively, in 1996 for
serving as Vice Presidents and Directors of the Company. Mr. Sherman Winthrop
received $13,750 in 1996 for serving as a Director of the Company. In addition,
in 1996 Mr. Lipschultz, Ms. Johnson and Mr. Reardon each received an annual
trustee fee of $34,504 paid by the Foundation.
INFORMATION ABOUT CERTAIN EXECUTIVE OFFICERS AND OTHER OFFICERS
Mr. Stan K. Dardis, who is 47 years old, has been Executive Vice President and
Chief Operating Officer of the Company since June 1996. From December 1993 until
June 1996, Mr. Dardis was Executive Vice President and Retail Banking Services
Director of the Company. He has also been a Director of BFSI since September
1993.
From December 1989 until June 1993, Mr. Dardis was President, Chief Executive
Officer, and a Director of Metropolitan Financial Bank, a subsidiary of
Metropolitan Financial Corporation.
Mr. Duaine C. Espegard, who is 53 years old, has been an Executive Vice
President and Group President of the Company and BFSI since December 1993. From
January 1989 until December 1993, he was a Vice President of the Company. Mr.
Espegard has been a Director of BFSI since 1984. He is also Chief Executive
Officer of First American Bank Valley in Grand Forks, North Dakota, one of the
Company's subsidiary banks ("Subsidiary Banks"), and has served in such capacity
since its acquisition in September 1993.
Mr. Kenneth P. Nelson, who is 58 years old, has been an Executive Vice President
and Group President of the Company and BFSI since December 1993. From January
1989 until December 1993, he was a Vice President of the Company. Mr. Nelson has
been a Director of BFSI since 1984.
Mr. Gene H. Sipe, who is 59 years old, has been an Executive Vice President and
Group President of the Company and BFSI since December 1993. From January 1989
until December 1993, he was a Vice President of the Company. Mr. Sipe has been a
Director of BFSI since 1984.
Mr. Brent J. Gray, who is 37 years old, has been Senior Vice President and Chief
Financial Officer of the Company since December 1993 and Senior Vice President
and Chief Financial Officer of BFSI since May 1991. Since March 1992 until
December 1993, he served under the title of Vice President and Chief Financial
Officer of the Company. Mr. Gray has been a Director of BFSI since September
1996.
Mr. Ernest W. (Bud) Jensen, who is 49 years old, has been Senior Vice President
and Chief Credit Officer of the Company and BFSI since April 1994. From January
1991 until April 1994, he was Senior Vice President--Credit of BFSI. Mr. Jensen
has been a Director of BFSI since September 1996.
INFORMATION CONCERNING MEETINGS OF BOARD OF DIRECTORS
During the fiscal year ended December 31, 1996, the Board of Directors held
eight formal meetings and adopted resolutions by a unanimous written action in
lieu of a meeting one time; no Director attended fewer than 75% of all meetings
held when he or she was a Director. Board members also met informally during the
year to discuss various aspects of the business affairs of the Company. The
Company has no standing audit, nominating or compensation committee or any other
committee performing similar functions.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table summarizes the annual compensation paid by the Company and
its subsidiaries for services rendered in all capacities during each of the
years ended December 31, 1994, 1995 and 1996 and certain other compensation paid
in 1994, 1995 and 1996 with respect to the Company's Chief Executive Officer and
its four most highly compensated executive officers, other than its Chief
Executive Officer, whose total annual salary and bonus exceeded $100,000 for
1996:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------------- --------------
Value of Stock
Name and Principal Bonus Received All Other
Position Year Salary Earned(1) Under ESOP(2) Compensation(3)
- ------------------ ---- ------ --------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Terry M. Cummings, 1996 $ 250,008 $ 100,000 $ 1,711 $ 41,803
President and Chief 1995 245,620 58,500 1,797 39,043
Executive Officer 1994 220,000 61,050 785 45,019
Stan K. Dardis, 1996 $ 204,917 $ 58,674 $ 1,711 $ 16,959
Executive Vice 1995 180,834 45,500 1,797 14,445
President 1994 175,000 49,150 -- 712
Gene H. Sipe, 1996 $ 172,500 $ 46,192 $ 1,711 $ 36,607
Executive Vice 1995 168,383 40,000 1,797 45,135
President 1994 162,500 46,702 785 48,365
Duaine C. Espegard, 1996 $ 159,967 $ 42,805 $ 1,711 $ 32,336
Executive Vice 1995 157,024 35,000 1,797 57,742
President 1994 152,903 25,026 785 32,114
Kenneth P. Nelson, 1996 $ 157,750 $ 42,245 $ 1,711 $ 26,511
Executive Vice 1995 154,035 25,708 1,797 22,050
President 1994 149,200 20,000 782 28,500
</TABLE>
----------------------------------
(1) Represents bonuses earned in the indicated year which were paid in the
subsequent year under the Company's Annual Incentive Compensation
Plans. See "Election of Directors and Management Information -- Report
of Board of Directors on Annual Compensation." The executive officers
named in the table above may elect to defer a part or all of the bonus
dollars earned under the Annual Incentive Compensation Plan pursuant to
the Company's Deferred Compensation Plan for Directors of Bremer
Financial Services, Inc. ("Deferred Compensation Plan").
(2) Represents the dollar value of shares of Class A Common Stock earned in
the years shown for the account of the named executive officers as part
of the discretionary component of the Bremer Banks Profit Sharing Plus
Plan ("Profit Sharing Plan") available to all employees. These shares
are held in the Company's Employee Stock Ownership Plan ("ESOP").
Dollar value is calculated based upon the per share fair market value
of the Class A Common Stock as determined by independent appraisal in
effect at the time the award is determined, as there is no established
trading market for the Company's Class A Common Stock. The dollar
values of the shares of Class A Common Stock held under the ESOP for
the accounts of the executive officers named in the Table, based upon
the $26.35 per share fair market value in effect at December 31, 1996
as determined by independent appraisal, were as follows: Mr. Cummings
($32,230), Mr. Dardis ($3,002), Mr. Sipe ($26,874), Mr. Espegard
($22,966), and Mr. Nelson ($25,685). Under the ESOP, and at the option
of the Administrator thereof, cash dividends declared on the shares of
Class A Common Stock held by the ESOP will be held in the ESOP, used to
acquire additional shares, distributed to the ESOP participants, or
allocated to the participants' other investment account.
(3) Consists of (i) life insurance premiums paid by the Company on behalf
of the executive officers named in the Table pursuant to the Company's
Benefit Bank program available to all employees; (ii) amounts
contributed by the Company on behalf of the named executive officers
under the Profit Sharing Plan available to all employees; (iii) amounts
contributed by the Company under the Company's Supplemental Executive
Retirement Plan in the form of a nonqualified deferred compensation
plan (the "SERP") which supplements the Company's qualified pension
plan, known as the Bremer Banks Retirement Plan; and (iv) reimbursement
of relocation expense incurred in connection with position or
responsibility changes, or as a term of employment. Life insurance
premiums paid in 1996 consisted of the following: Mr. Cummings
($2,026), Mr. Dardis ($682), Mr. Sipe ($1,565), Mr. Espegard ($1,098),
and Mr. Nelson ($326). Amounts contributed under the Profit Sharing
Plan in 1996 consisted of the following: Mr. Cummings ($9,092), Mr.
Dardis ($9,092), Mr. Sipe ($9,092), Mr. Espegard ($9,092), and Mr.
Nelson ($9,092). Amounts contributed under the SERP in 1996 consisted
of the following: Mr. Cummings ($30,685), Mr. Dardis ($7,185), Mr. Sipe
($25,950), Mr. Espegard ($22,146), and Mr. Nelson ($17,093).
Reimbursement of relocation expense consisted of $29,702 in 1995 for
Mr. Espegard.
SUMMARY OF PLANS
EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP"). The ESOP is a discretionary defined
contribution plan for all employees of the Company and its affiliates designed
to invest primarily in the capital stock of the Company, including the Class A
Common Stock. The ESOP is funded solely with contributions made by the Company.
It is the intention of the Company to make periodic contributions to the ESOP in
addition to or in lieu of the "discretionary" component of the Profit Sharing
Plan. See "Election of Directors and Management Information -- Compensation
Pursuant to Plans -- Profit Sharing Plan." The maximum amount contributable
under the ESOP (as it has not borrowed any funds to purchase the Company's
capital stock) is 15% of the plan compensation of all eligible employees,
reduced by any amounts contributed to the Company's Profit Sharing Plan (which
is discussed below). "Plan compensation" includes all regular salary and wages
paid or accrued for eligible employees and 100% of the current year's "qualified
commissions" (which is defined as commissions received as part of a specified
compensation plan as approved by the Plan Administrator), but excludes overtime
and bonuses. Amounts may be contributed for eligible employees for each year in
which a contribution is made to the ESOP from the time the employee becomes
eligible to participate until the time the employee no longer participates.
Benefits are distributed to employees or their beneficiaries in the event of an
employee's retirement, death or disability. In addition, an employee who
terminates his or her employment with the Company or any of its related entities
may elect a distribution beginning not later than one year after the fifth year
following the year in which the employee leaves the ESOP and then over a period
of not longer than five years.
No amounts were paid or distributed pursuant to the ESOP during 1996 to the
individuals named in the Summary Compensation Table. The values of the shares of
Class A Common Stock acquired under the ESOP for the accounts of the individuals
named in the Summary Compensation Table during 1994, 1995 and 1996 are set forth
in the Table under the heading "Long-Term Compensation -- Value of Stock
Received Under ESOP." Employer contributions (which were made in 1996 and 1997),
for all the Company's employees (including executive officers) participating in
the ESOP in 1996, were $350,000.
PROFIT SHARING PLAN. The Company maintains under Sections 401(a) and 401(k) of
the Code a profit sharing plan known as the Bremer Banks Profit Sharing Plus
Plan ("Profit Sharing Plan"), in which executive officers participate on the
same basis as all other employees, subject to certain overall and specific
anti-discrimination restrictions. It is a defined contribution profit sharing
plan designed to provide retirement benefits to the employees of the Company and
its affiliates. The Profit Sharing Plan is designed to be funded with both
Company contributions and employee contributions. The Company's contribution
consists of three components: 2% Credit, Match and Discretionary. Eligible
employees are given 2% of their pay as a credit which they can redeposit in the
Profit Sharing Plan, which constitutes part of the Section 401(k) portion of the
Profit Sharing Plan. The employees are able to contribute to the Profit Sharing
Plan on a pre-tax basis up to an additional 13% of their "plan compensation"
(which is also part of the Section 401(k) portion of the Profit Sharing Plan).
"Plan compensation" includes all regular salary and wages paid to or accrued for
employees and 100% of the current year's "qualified commissions" (consisting of
commissions received as part of a specified compensation plan as approved by the
Plan Administrator), but excludes overtime and bonuses. The Company will "match"
between 50% and 100% (depending on the percentage of pay contributed) of the
first 1% to 5% of plan compensation the employee contributes on a pre-tax basis.
The match can exceed neither 2.5% of any individual employee's plan compensation
nor 50% of the adjusted net earnings of the Company for the particular plan
year. The discretionary contribution is based on consolidated earnings of the
Company. It may be paid in the form of the Company's stock contributions (or
contributions of cash used to purchase Company capital stock) to the ESOP or
cash contributions to the Profit Sharing Plan. See "Election of Directors and
Management Information -- Summary of Plans -- Employee Stock Ownership Plan."
Under the Profit Sharing Plan, all cash dividends paid on the Class A Common
Stock are allocated to the accounts of the participants holding shares of Class
A Common Stock in their profit sharing accounts.
No amounts were paid or distributed during 1996 pursuant to the Profit Sharing
Plan to the individuals in the Summary Compensation Table. Benefit amounts
contributed by the Company pursuant to the Profit Sharing Plan for the
individuals named in the Summary Compensation Table during 1994, 1995 and 1996
are set forth in the Summary Compensation Table under the heading "All Other
Compensation." Employer contributions (which were made in 1996 and 1997), for
all the Company's employees (including executive officers) participating in the
Profit Sharing Plan in 1996, were $1,744,000.
PENSION PLAN. The Company maintains the Bremer Banks Retirement Plan ("Pension
Plan"), which is a defined benefit pension plan designed to provide retirement
benefits to the employees of the Company and its subsidiaries. The following
table sets forth estimated annual retirement benefits payable under the Pension
Plan at age 65 (normal retirement age), calculated based on final average
compensation (salaries are assumed to remain constant), years of service under
the Pension Plan, and a Social Security Covered Compensation amount of $43,668
for someone born in 1940:
PENSION PLAN TABLE
Estimated Annual Retirement Benefits
Years of Service
---------------------------------------------------------
Compensation 10 20 30 or more
- ------------ ------ ------ ----------
$ 75,000.............. 9,100 18,300 27,400
100,000.............. 12,900 25,900 38,800
125,000.............. 16,700 33,500 50,200
150,000.............. 20,500 41,100 61,600
175,000.............. 24,300 48,700 73,000
200,000.............. 28,100 56,300 84,400
225,000.............. 31,900 63,900 95,800
250,000.............. 35,700 71,500 107,200
275,000.............. 39,500 79,100 118,600
300,000(1)........... 43,300 86,700 130,000
- ----------------------
(1) The plan incorporates the pay limits under Section 401(a)(17) of the
Code. The pay limit for 1996 was $150,000, and this amount is indexed
each year. The retirement benefits shown above do not reflect the pay
limit.
With respect to the individuals named in the Summary Compensation Table, the
years of credited service are as follows: Mr. Terry M. Cummings (20), Mr. Stan
K. Dardis (3), Mr. Gene H. Sipe (34), Mr. Duaine C. Espegard (27) and Mr.
Kenneth P. Nelson (23).
The Company's contributions under the Pension Plan are actuarially determined
based upon the age, compensation, and years of service of the participating
employees. The criteria used to determine the amounts contributed or payable
does not depend upon any performance formula or measure. The "normal retirement
benefit" is equal to 1% of an employee's "final average compensation" multiplied
by the employee's "credited service" (one month for each calendar month during
which the employee is compensated as a participant under the Pension Plan), at
normal retirement date with a maximum of 30 years plus .52% of the employee's
final average compensation in excess of the "Social Security covered
compensation amount" multiplied by the employee's credited service at normal
retirement date, up to a maximum of 30 years. "Final average compensation" is
defined to mean average monthly compensation during the 60 consecutive months
which produce the highest average out of the last 120 consecutive months of
employment. The "Social Security covered compensation amount" is the average of
the Social Security taxable wage base in effect for the 35 year period ending in
the year before the employee attains Social Security retirement age. In
addition, an employee may receive an early retirement benefit if he or she has
attained age 55 and has completed at least five years of vesting service. The
early retirement benefit can be reduced to a minimum of 42% of the regular
retirement benefit, depending upon the number of years of service the employee
has within the Pension Plan. For purposes of the Pension Plan, the term
"compensation" includes salary and wages, and for those eligible participants in
the Executive Incentive Program, the "target award" portion of the Annual
Incentive Compensation Plan described below, but it excludes any employee's
credits under any flexible benefit program under Section 125 of the Code. In
addition, compensation excludes any contributions made to the ESOP or the Profit
Sharing Plan, except for elective pre-tax contributions to the Profit Sharing
Plan by employees. At retirement, benefits are computed on a straight life
annuity basis.
REPORT OF BOARD OF DIRECTORS ON ANNUAL COMPENSATION
The Company's Board of Directors is responsible for insuring that the
compensation for executives is consistent with the Company's compensation
philosophy. The Board believes that the Company's executive compensation is
reasonable given its financial performance and as compared to other similar
companies in the industry.
The Board annually evaluates the performance and compensation of the Company's
Chief Executive Officer, Mr. Terry M. Cummings, and its other executive
officers. The Board's deliberations regarding the annual compensation of Mr.
Cummings and other officers do not take place in the presence of the officer
whose compensation is being discussed.
COMPENSATION PRINCIPLES. The executive compensation strategy of the Company's
Board of Directors is based on the beliefs and guiding principles that
compensation should be aligned with business strategy, Company values, and
management initiatives. The program:
Rewards executives for strategic management and the enhancement of
stockholder value as measured by financial performance.
Integrates compensation programs with the Company's strategic planning
and measurement processes.
Supports a performance-oriented environment that rewards performance
with respect to the goals of the Company and its affiliates.
Attracts, retains, and motivates key executives critical to the
long-term success of the Company as a whole.
RELATIONSHIP OF COMPENSATION TO PERFORMANCE. Profitability and attainment of
strategic corporate objectives are the major determinants in the compensation
awarded to the Company's executives. While there is no precise formula for
determining base salary as compared to Company performance, these measures are
generally the basis for the Annual Incentive Compensation Plans, as described
below.
ANNUAL INCENTIVE COMPENSATION PLANS. The Company's Annual Incentive Compensation
Plans ("Annual Plans") are designed to provide, through cash awards, an
incentive to key officers of the Company to meet or exceed prescribed targets.
The basis of payout for the majority of the incentive plans, including the
annual plan for Mr. Cummings, is 100% of the performance target of Return on
Realized Equity ("RORE"), measured at the Company level on a consolidated group
basis. Two of the plans included performance targets based upon the attainment
of workplan goals. The Annual Plans for these individuals for the year ended
December 31, 1996 specified a maximum award ranging from 20% to 60% of salary
depending upon the officer's position and level of responsibility. Lesser
amounts may be paid to an executive officer based on the degree of attainment of
the goals. The amounts paid under the Annual Plans to the executive officers
named in the Summary Compensation Table are set forth under the heading "Annual
Compensation -- Bonus Earned."
LONG TERM INCENTIVE COMPENSATION PLANS. The Company's Long Term Incentive
Compensation Plans ("Long Term Plans") are designed to provide, through cash
awards, an incentive to key officers of the Company to meet or exceed prescribed
targets. More specifically, the goals of the Long Term Plans are to: 1) ensure
high levels of profitability; 2) encourage growth through acquisitions; and 3)
increase efficiencies. The performance measure is RORE measured at the Company
level on a consolidated basis, averaged over a three year performance period.
The Long Term Plans were effective January 1, 1994; however, no payouts were
earned for the period from 1994 through 1996. For Mr. Cummings, the target
payout is 60% of salary, and the maximum award is 120% of salary. For Messrs.
Dardis, Sipe, Espegard, and Nelson, the target payout is 45% of salary and the
maximum payout is 105% of salary. Lesser amounts may be paid to an executive
officer based on the degree of attainment of the goals. The officers named above
have the option to defer a part or all of any incentive dollars earned under the
Long Term Plans pursuant to the Deferred Compensation Plan described below.
DEFERRED COMPENSATION PLAN FOR DIRECTORS OF BREMER FINANCIAL SERVICES, INC.
Effective January 1, 1994, the Company implemented the Deferred Compensation
Plan for Directors of Bremer Financial Services, Inc. (the "Deferred
Compensation Plan"). All of the executive officers named in the Summary
Compensation Table are participants in the Deferred Compensation Plan. Under the
Deferred Compensation Plan, each participant may elect to defer certain
percentages of payouts under the Annual Plans and the Long Term Plans. Interest
at an annual market rate is accrued with respect to compensation deferred under
the Deferred Compensation Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Effective January 1, 1994, the Company
implemented the Supplemental Executive Retirement Plan ("SERP"). Messrs.
Cummings, Dardis, Sipe, Espegard, and Nelson are participants in the SERP.
Eligibility to participate requires the individual to have a base annual salary
greater than $140,000, indexed yearly for the cost of living. The participant
becomes vested in this benefit after five years of service with the Company. The
SERP is designed to replace benefits lost due to changes in the Code.
Specifically, it supplements the benefits determined under the Pension Plan to
the extent the benefits under the Pension Plan with its pay limit of $150,000
(as indexed in the future based on the cost of living) is less than what the
benefits would have been had the pay limit remained at $235,840 (as indexed in
the future based on the cost of living). The criteria used to determine the
amounts contributed or payable does not depend upon any performance formula or
measures.
COMPANY PERFORMANCE AND COMPENSATION OF CHIEF EXECUTIVE OFFICER. During Mr.
Cummings' tenure as the Company's President and Chief Executive Officer, the
Company has performed well as compared to historical Company performance and the
performance of the banking industry as a whole. Since 1990, the Company's
earnings have increased at an average rate of 14.5% annually. Additionally, Mr.
Cummings has had major responsibility for notable progress made by the Company
on several key strategic objectives, including acquisitions and productivity
improvements. This performance resulted in increased compensation paid to Mr.
Cummings. Specifically, his annual compensation (exclusive of bonuses received)
increased 0% from 1993 to 1994, 11.6% from 1994 to 1995, and 1.8% from 1995 to
1996, while the Company's earnings declined 4% from 1993 to 1994, increased 5.2%
from 1994 to 1995, and increased 17.3% from 1995 to 1996.
APPROVAL OF EXECUTIVE COMPENSATION. The entire Board of Directors of the
Corporation, in lieu of appointing a compensation committee, sets and
administers the policies and plans which govern executive compensation. The
identities of the members of the Board of Directors are set forth in the section
of this Proxy Statement entitled "Election of Directors and Management
Information -- Information About Nominees for Election as Directors."
The Board believes that its current compensation philosophy and approach has
served the Company's stockholders fairly, and it plans to continue the same
compensation philosophy and approach for the foreseeable future.
By the Board of Directors:
William H. Lipschultz
Terry M. Cummings
Charlotte S. Johnson
Daniel C. Reardon
Sherman Winthrop
PERFORMANCE GRAPH
The following graph and table compare, since 1991, the yearly percentage change
in the cumulative total stockholder return on the Company's Class A Common Stock
(as measured by dividing (i) the sum of (A) the cumulative amount of dividends
for the measurement period, assuming dividend reinvestment, and (B) the
difference between the realized book value of the Company's Class A Common Stock
at the end and the beginning of the measurement period; by (ii) such realized
book value at the beginning of the measurement period) with the cumulative total
return of both the S&P (Standard & Poor's) 500 Composite and the Nasdaq Bank
Stocks Composite. It should be noted that the Company's Class A Common Stock is
not actively traded on an established market and generally all sales of shares
of Class A Common Stock consist of transfers through the Company's Profit
Sharing Plan. As such, sales are based on the Company's unrealized book value
per share. The "prices" for shares of Class A Common Stock in the graph and
table reflect the realized book value per share in effect at that time, which
excludes unrealized market value adjustments pursuant to Statement of Financial
Accounting Standards No. 115 and which is not greatly influenced by market
forces which otherwise may affect the trading value of stocks, such as
government policy, investor psychology, speculation, and perceptions of the
Company's industry.
PERFORMANCE MEASUREMENT COMPARISON
CUMULATIVE TOTAL STOCKHOLDER RETURN SINCE 1991
[PLOT POINTS GRAPH]
================================================================================
1992 1993 1994 1995 1996
-------------------------------------------------------------
Company 13.97 29.18 42.24 54.99 68.86
-------------------------------------------------------------
S&P 500 7.69 18.41 19.70 56.64 79.60
-------------------------------------------------------------
Nasdaq Bank Stocks 45.73 59.54 59.17 108.25 137.67
================================================================================
(1) The total return on investment (change in the year end stock price plus
re-invested dividends) for each of the periods for the Company's Class
A Common Stock, the S&P 500 Composite and the Nasdaq Bank Stocks
Composite is based on the stock price or composite index at the end of
fiscal 1991.
CERTAIN TRANSACTIONS
BFSI has employment agreements with Messrs. Terry M. Cummings, Duaine C.
Espegard, Kenneth P. Nelson and Gene H. Sipe ("BFSI Agreements") which provide
for an employment term expiring December 31, 1998. However, employment under the
BFSI Agreements may be terminated at an earlier date upon the willful failure or
refusal of the officer to perform his duties; at BFSI's election, upon the
inability of the officer to perform his duties for a period in excess of 180
consecutive days as a result of accident, illness, or other disability; or upon
the officer's death. The BFSI Agreements provide that the base salary paid in
any year cannot be less than the base salary paid in the previous year.
The Subsidiary Banks have had, and expect to have in the future, banking
transactions in the ordinary course of business with some directors and officers
of the Company and directors of a significant subsidiary (including the
Subsidiary Banks) or with an associate of such person. Such transactions have
been and will be made on substantially the same terms, including interest rates
on loans and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and do not and will not involve more than
normal risk of collectibility. The dollar amount of these loans was $14.1
million at December 31, 1995 and $16.5 million at December 31, 1996. During
1996, $15.4 million of new loans were made, repayments totalled $13.5 million,
and changes in the composition of directors and officers or their associations
decreased the loans outstanding by $0.5 million. No loans to a related person
were restructured to provide for a deferral of payments and/or a reduction in
interest rates.
ACCOUNTANTS
On February 26, 1997, and subject to the ratification of the holders of Class A
Common Stock, the Board of Directors recommended that Deloitte & Touche LLP be
engaged as the Company's principal accountant to audit the Company's
consolidated financial statements for the year ended December 31, 1997. The
affirmative vote of a majority of the shares of Class A Common Stock is
necessary at the Annual Meeting at which a quorum is present either in person or
by proxy to ratify the selection by the Board of Directors of Deloitte & Touche
LLP as the Company's independent accountant. If the holders of Class A Common
Stock do not ratify the selection of Deloitte & Touche LLP, other certified
public accountants will be considered and selected by the Board of Directors.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement, if they desire
to do so, and will be available to respond to appropriate questions.
OTHER BUSINESS
All items of business intended by the management to be brought before the Annual
Meeting are set forth in this Proxy Statement, and management knows of no other
business to be presented. If other matters of business not presently known to
the Board of Directors shall be properly raised at the Annual Meeting, the
persons named as the proxies will vote on such matters in accordance with their
best judgment.
ANNUAL REPORT
For a copy of the Company's Annual Report on Form 10-K, please contact Mr. Brent
J. Gray, Bremer Financial Corporation, 445 Minnesota Street, Suite 2000, St.
Paul, Minnesota 55101, (612) 282-9741.
FUTURE STOCKHOLDER PROPOSALS
Under the Securities Exchange Act of 1934, the stockholders of the Company have
certain rights to have stockholder proposals included within the Proxy Statement
of the Company for the Company's Annual Stockholders' Meeting in 1998. Any
voting stockholder desiring to submit a proposal for consideration at the Annual
Meeting held in 1998 should forward the proposal so that it will be received in
the Company's principal executive offices no later than November 19, 1997.
Proposals received by that date that are proper for consideration at the Annual
Meeting and otherwise conform to the rules of the Securities and Exchange
Commission will be included in the 1998 Proxy Statement. Due to the technical
nature of the rights of stockholders and the Company in this area, a stockholder
desiring to make a stockholder proposal should consider consulting his or her
personal legal counsel with respect to such rights.
By Order of the Board of Directors
/s/ Janice a. Aus
JANICE A. AUS
Dated: March 19, 1997 Secretary
Bremer Financial Corporation
A Minnesota Corporation
445 Minnesota Street - Suite 2000
St. Paul, Minnesota 55101
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
William H. Lipschultz and Terry M. Cummings, and either of them, are hereby
appointed Proxies, each with the power to appoint his substitute, to represent
and to vote, as designated below, all shares of the Class A Common Stock of
Bremer Financial Corporation held of record by the undersigned on March 7, 1997
at the Annual Meeting of Shareholders to be held on April 15, 1997 or any
adjournment thereof.
1. PROPOSAL TO FIX NUMBER OF DIRECTORS AT NOT LESS THAN FOUR (4) NOR MORE
THAN SEVEN (7):
[ ] For [ ] Against [ ] Abstain
2. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below except as marked to the contrary
below.
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name below.)
William H. Lipschultz, Terry M. Cummings, Charlotte S. Johnson,
Sherman Winthrop, and Daniel C. Reardon
3. PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT ACCOUNTANT TO AUDIT THE CONSOLIDATED FINANCIAL STATEMENTS
OF BREMER FINANCIAL CORPORATION FOR THE YEAR ENDED DECEMBER 31, 1997:
[ ] For [ ] Against [ ] Abstain
In the event of the inability or unwillingness of one or more of the above named
nominees to serve as a director at the time of the Annual Meeting on April 15,
1997 or any adjournments thereof, the shares represented by the proxies will be
voted in favor of the remainder of such nominees and may also, in the discretion
of the holders of said proxies, be voted for other nominees not named herein in
lieu of those unable or unwilling to serve. As of the date hereof, the Board of
Directors knows of no nominee who is unwilling or unable to serve.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting; management is not presently aware of
any such matters to be presented for action at the meeting.
The undersigned hereby ratifies and confirms all the proxies shall lawfully do
or cause to be done by virtue hereof and hereby revokes all proxies previously
given to vote such shares.
This Proxy, when properly executed, shall be voted in the manner indicated by
the undersigned shareholder, but if no direction is made, this Proxy will be
voted in favor of fixing the number of Directors at not less than four nor more
than seven, for the directors named in the Proxy Statement, and in favor of the
proposal to ratify the selection of Deloitte & Touche LLP to audit the
consolidated financial statements of Bremer Financial Corporation for the year
ended December 31, 1997.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, or in some other fiduciary capacity, please give full title
as such.
DATED:_____________________________, 1997. If a corporation, please sign in
full corporate name by president or
other authorized officer(s). If a
partnership, please sign in a
partnership name by authorized
person(s).
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
(PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE
ENCLOSED ENVELOPE)
